FRANKFURT (Reuters) - U.S. and British officials are preparing to announce a settlement with Deutsche Bank AG (DBKGn.DE) as soon as Thursday over allegations it tried to rig benchmark interest rates such as Libor, two sources with knowledge of the matter said.
Deutsche Bank said it was working with the relevant authorities but declined comment further. Penalties are likely to exceed $1.5 billion, the amount UBS Group AG UBSG.VX paid in 2012, Reuters reported previously.
If negotiators complete the settlement as planned, it could help remove uncertainty that has burdened Deutsche Bank shares for years, but would not wipe the slate clean.
The world’s second-largest foreign exchange trader still faces potential claims or settlements over past issues including alleged attempts at foreign exchange benchmark manipulation and alleged violations of U.S. sanctions on Iran.
At the end of 2014, Deutsche Bank had set aside 3.2 billion euros ($3.4 billion) in litigation reserves, outlined another 1.9 billion in potential risks and indicated it faced an additional 4.8 billion in mortgage repurchase claims.
“The full extent of DB’s litigation costs is unknown,” wrote ratings agency Fitch in a recent note. “It is likely that costs at DB will remain a drag on its future results despite the existing coverage (reserves).”
The expected costs of the Libor settlement have increased over the past half-year, with the bank originally expecting to pay around 1 billion euros to settle Libor claims with U.S. and UK authorities.
After several delays, German financial watchdog Bafin will likely sum up its own investigation into Deutsche’s role in the rate rigging scandal as early as May. The regulator, which has worked independently of U.S. and UK authorities, has found no evidence that key managers of the bank knew about alleged manipulation.
Deutsche Bank has already settled with European antitrust regulators over Libor and its euro equivalent Euribor, agreeing to pay 725 million euros.
Fines and settlements have been a burden on management at Deutsche Bank, leading to a boardroom reshuffle in October in which auditing head Christian Sewing moved to the board as chief of legal and incident management, charged ed with clearing the decks.
The bank plans to decide on a major restructuring as early as this month. It has decided to jettison its Postbank DPBGn.DE arm and may sell its own-branded retail network as it focuses on more-profitable investment banking.
($1 = 0.9296 euros)
Writing by Thomas Atkins; Editing by Christoph Steitz and David Holmes